High ETF inflows, low gold imports and high old gold sales in Jan
The rally in gold prices has weighed heavily on the retail demand for gold jewellery
Chennai: January saw unprecedented inflows of Rs 3751 crore in January, significantly higher than the average inflows of Rs 940 crore over the previous 12 months. The month also saw a 43 pc sequential drop in imports to about 35 tonnes due to subdued purchases and increased sales of old gold, finds WGC.
With gold prices surging to record highs, there has been an unprecedented demand for the metal for investment purposes.
According to the Association of Mutual Funds in India (AMFI), gold ETFs recorded net inflows of Rs 3751 crore in January, significantly higher than the average inflows of Rs 940 crore over the previous 12 months.
“Anecdotal reports suggest that the strong inflows in January can be attributed to investors redirecting free cash flow towards gold ETFs for diversification amid ongoing global and domestic economic and policy uncertainty. The sustained weakness in the domestic equity markets has also been driving flows into gold ETFs, with investors pulling back from equities in favour of the safe-haven appeal of gold,” finds WGC.
The rally in gold prices has weighed heavily on the retail demand for gold jewellery. This slowdown in jewellery demand has left retailers reluctant to restock, as they face challenges in meeting payment terms with manufacturers. Since December, domestic gold prices have been trading at a discount to international prices, with the gap widening from an average $3/oz in December to $23/oz.
January's imports were the lowest since July 2024. According to Ministry of Commerce data, the gold import bill for the month totalled $2.68 billion, a 43 per cent decrease compared to December. However, it was approximately 40 per cent higher than January of the previous year. WGC estimates that the volume of imports in January ranged between 30 -35 tonnes.
Rather than making fresh purchases, many buyers are opting to exchange old gold for new jewellery. Additionally, as gold prices surged past previous thresholds, many consumers are also taking the opportunity to sell old gold and lock in profits.
